Legal Issues When Running A More Activist Corporation
Posted on: 24 March 2020Share
In recent years, companies have become more focused on being engaged with the world on a wide range of fronts. This new form of activism covers the spectrum from social movements to pushing legislation. Every corporate lawyer will tell you, however, that there are some things to keep in mind before advancing an agenda from a position of business authority. Let's examine these concerns based on four different forms of activism companies pursue.
The free speech rights of corporations have been significantly expanded in the 21st Century. Combined with growing pressures from consumers for companies to be engaged with social issues, this has driven much more activism from firms.
While there's a good chance a company engaged in such activism will have a free speech defense for its conduct, it's still wise to have a securities law attorney review all socially-engaged statements to verify they don't run afoul of SEC rules. For example, investments in green energy might be seen as something that ought to be embargoed because they influence the bottom line. Remember that free speech isn't a magic wand that can be waved over disclosure and compliance rules.
The biggest concern on this front is the possibility that pushing particular forms of legislation may be seen as a form of lobbying. Before you get too involved talking with political figures about legislation, you'll want to run your plans past a corporate lawyer. They'll give you a better sense of what's OK to discuss and what might be better left to a lobbying firm or a political action committee.
Shareholders have become much more activist in their conduct over the last half-century. Especially when shareholder activism runs counter to the company's current direction, this can drive an impulse to push back against the line being advanced. As a securities law attorney will tell you, though, it's critical to not trample shareholder rights or to misuse your position to advance an agenda that harms shareholders. Open warfare between shareholders and officers is rarely a good thing, and it's wise to let a corporate lawyer intermediate.
Most businesses have numerous stakeholders, such as employees, unions, creditors, and directors. While it's essential to communicate effectively with all of these parties, this is an area where open communication can sometimes run up against securities regulations.
For example, negotiations with employees and a labor union may significantly influence a company's stock price. All parties to the matter must handle their communications in a fashion consistent with SEC regulations.
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